Analyst Note
| Kevin Brown, CFA |No-moat Pebblebrook reported third-quarter results that were slightly ahead of our expectations. However, guidance for the fourth quarter came in below our estimates, leading us to believe we won’t make any material changes to our $29 fair value estimate. Occupancy was 72.7% in the third quarter, which is better than the 54.9% figure reported in 2021, but still below the 86.0% figure reported in 2019. Meanwhile, rate growth continues to be strong at 10.3% year over year and 19.9% higher than 2019’s average rate. As a result, revenue per available room, or revPAR, was up 45.9%, which beat our estimate of 35.1% growth and is now 1.3% higher than 2019’s third-quarter revPAR. However, expense growth was also higher than we anticipated at 40.0%, so while the same-store EBITDA margin improved 200 basis points to 32.4% it did slightly miss our 34.7% estimate. Still, the strong revenue growth was enough for Pebblebrook to report adjusted funds from operations, or FFO, of $0.66 per share in the third quarter, which was 6 cents better than our estimate and 47 cents better than third-quarter 2021.